Accounting is a general practice of recording financial transactions for a business or individual entities to represent the financial position that can be analyze and evaluate by any third person. Since these practices are highly standardized and are often utilized by the third person, it is extremely important that everyone applies a standard approach to the same for avoiding any further complications and ease of comparison and evaluation.
Every country has its own set of accounting standards and principles. These standards are generally referred to as the Generally Accepted Accounting Principle (GAAP). In India, the accounting standards are published and guarded by the Institute of Chartered Accountants of India (ICA). These standards include several guidelines relate to different aspects of accounting, such as disclosure of the accounting policies, valuation of inventories, cash flow statements, financial instrument presentation and segment reporting. Whereas in the United States, these guidelines are set by the Financial Accounting Standards Board (FASB). This leads to several variations between the two set standards. Even the procedures described for the formation of balance sheets differ in India and in the US. In India, the accounting standards do not define any prescribe or set format for the presentation of the financial items, whereas according the US standards, entities are generally presented as a classified or non-classified balance sheet. The presentation and the formation guidelines for other financial statements, including income statement and cash flows statements are also different.
There are also numerous differences that are observed between the recording of other items as well.
Hence, we see that the standards set by the concern entities are extremely different in India and in the US. Other than these two countries, there is another group of guidelines; these are called the International Accounting Standards (IAS) set by the International Accounting Standards Board. All these guidelines are quite similar in their nature and methodologies, hence making it extremely easier and understandable for the people all across the world.